The Employment Rights Act 2025 (“the Act”) received Royal Assent on 18th December 2025. This marks the most significant reform of employment law rights in decades. With phased implementation beginning in April 2026, employers face substantial operational and financial implications. This article sets out three major changes that employers must prepare for.
1. Unfair Dismissal Qualifying Period
From January 2027, the qualifying period for unfair dismissal claims will be reduced from two years to six months’ service, curtailing the period during which employers can assess new hires with minimal legal risk. The Act will also abolish the compensatory award cap for unfair dismissal. Currently, this cap is the lower of £118,223.00 or one year’s salary. Following this change, successful claims could result in substantial awards – particularly for senior employees or those with generous contractual benefits.
Additionally, from October 2026, the time limit for bringing all tribunal claims will be extended from three months to six months. This doubles the potential exposure period for employment disputes and will have an impact on retention periods for documents.
Hiring decisions will carry greater risks. Performance management should begin on day one. Employers must document every discussion, concern, or disciplinary action comprehensively. Managers should be trained on how to identify and manage performance concerns early. Crucially, decisions about an employee’s performance and conduct must be made early and well before the six-month point if employers are to take such decisions with relatively low risk. Notice periods or delays could push an employee’s service over the threshold, providing them with protection from unfair dismissal.
2. Enhanced Harassment Prevention Duties
Measures to strengthen harassment protections are already in force, with a proactive duty on employers to take “reasonable steps” to prevent sexual harassment of their employees having come into force on 26th October 2024. From October 2026, this duty will be extended. Employers will be obliged to take “all reasonable steps” to prevent harassment. This liability will extend to third-party harassment by customers, clients, contractors, and visitors. Tribunals may increase compensation awards by up to 25% where employers have failed to comply with this duty. Crucially, the duty will apply to all forms of harassment related to any of the nine protected characteristics under the Equality Act 2010.
This enhanced standard means one-off training sessions will be insufficient. Employers must demonstrate regular training, comprehensive policies, risk assessments, incident reporting systems, and documented preventive measures across all working environments. Client-facing businesses face higher exposure to risk, including hospitality venues, healthcare settings, and multi-contractor sites. These sectors require detailed preventive strategies.
The Act explicitly categorises sexual harassment disclosures as automatic ‘protected disclosures.’ This means employees who raise harassment concerns or report witnessing harassment gain immediate whistleblower protection. This creates a dual liability risk. Employers could face potential claims both for the underlying harassment and for any adverse treatment of the individual who reported it.
3. Family Leave Rights and Protections
From April 2026, significant changes to family-related leave entitlements take effect. Paternity leave and parental leave will become day-one rights, pregnancy-related protections will extend to six months post-return to work, and bereavement leave will expand to include pregnancy loss and other close family bereavements.
New employees may request paternity leave from their first day of employment. This could disrupt project timelines and team structures before employers have fully assessed new employees’ capabilities. However, Statutory Paternity Pay will still require 26 weeks’ continuous employment. Accordingly, this is a day-one right to unpaid leave for new starters, which may limit uptake.
Parental leave permits employees to take up to 18 weeks of unpaid leave before a child reaches 18 years of age. This will become immediately accessible from day one. The unpaid nature of this entitlement limits uptake in practice. However, employers must prepare for potential disruptions, particularly in small teams where arranging cover may be challenging.
The extension of pregnancy-related protections to six months post-return to work creates a significantly longer period of legal risk. Dismissals during this extended protection period will be deemed automatically unfair in all but a select few exceptional circumstances. These circumstances will be defined in forthcoming regulations. The expansion of bereavement leave will also include pregnancy loss before 24 weeks of gestation and other close family bereavements, which will be defined in the regulations.
Employers must update their family leave and bereavement policies to reflect these day-one entitlements and expanded protections. Line managers require training on the extended pregnancy protection period and the heightened risk of automatically unfair dismissal. The combined effect of these changes significantly increases both legal exposure and operational complexity.
Conclusion
These three changes represent only a portion of the Act’s transformative impact. The Act will introduce many additional reforms including zero-hours contract protections, fire-and-rehire restrictions, enhanced statutory sick pay entitlement and strengthened flexible working rights.
The initial April 2026 changes are only a couple of months away. Employers must act now to review policies, implement necessary changes, and ensure compliance before the new obligations take effect. Given the Act’s tight timeline, early preparation is essential to mitigate operational disruption and legal exposure.
If you would like to discuss any of the issues raised in this article or another employment law matter, please don’t hesitate to get in touch with our Employment team.
Home > News + events > Employment Rights Act 2025: Three critical changes every employer must prepare for
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Eve Cameron
Employment Rights Act 2025: Three critical changes every employer must prepare for
The Employment Rights Act 2025 (“the Act”) received Royal Assent on 18th December 2025. This marks the most significant reform of employment law rights in decades. With phased implementation beginning in April 2026, employers face substantial operational and financial implications. This article sets out three major changes that employers must prepare for.
1. Unfair Dismissal Qualifying Period
From January 2027, the qualifying period for unfair dismissal claims will be reduced from two years to six months’ service, curtailing the period during which employers can assess new hires with minimal legal risk. The Act will also abolish the compensatory award cap for unfair dismissal. Currently, this cap is the lower of £118,223.00 or one year’s salary. Following this change, successful claims could result in substantial awards – particularly for senior employees or those with generous contractual benefits.
Additionally, from October 2026, the time limit for bringing all tribunal claims will be extended from three months to six months. This doubles the potential exposure period for employment disputes and will have an impact on retention periods for documents.
Hiring decisions will carry greater risks. Performance management should begin on day one. Employers must document every discussion, concern, or disciplinary action comprehensively. Managers should be trained on how to identify and manage performance concerns early. Crucially, decisions about an employee’s performance and conduct must be made early and well before the six-month point if employers are to take such decisions with relatively low risk. Notice periods or delays could push an employee’s service over the threshold, providing them with protection from unfair dismissal.
2. Enhanced Harassment Prevention Duties
Measures to strengthen harassment protections are already in force, with a proactive duty on employers to take “reasonable steps” to prevent sexual harassment of their employees having come into force on 26th October 2024. From October 2026, this duty will be extended. Employers will be obliged to take “all reasonable steps” to prevent harassment. This liability will extend to third-party harassment by customers, clients, contractors, and visitors. Tribunals may increase compensation awards by up to 25% where employers have failed to comply with this duty. Crucially, the duty will apply to all forms of harassment related to any of the nine protected characteristics under the Equality Act 2010.
This enhanced standard means one-off training sessions will be insufficient. Employers must demonstrate regular training, comprehensive policies, risk assessments, incident reporting systems, and documented preventive measures across all working environments. Client-facing businesses face higher exposure to risk, including hospitality venues, healthcare settings, and multi-contractor sites. These sectors require detailed preventive strategies.
The Act explicitly categorises sexual harassment disclosures as automatic ‘protected disclosures.’ This means employees who raise harassment concerns or report witnessing harassment gain immediate whistleblower protection. This creates a dual liability risk. Employers could face potential claims both for the underlying harassment and for any adverse treatment of the individual who reported it.
3. Family Leave Rights and Protections
From April 2026, significant changes to family-related leave entitlements take effect. Paternity leave and parental leave will become day-one rights, pregnancy-related protections will extend to six months post-return to work, and bereavement leave will expand to include pregnancy loss and other close family bereavements.
New employees may request paternity leave from their first day of employment. This could disrupt project timelines and team structures before employers have fully assessed new employees’ capabilities. However, Statutory Paternity Pay will still require 26 weeks’ continuous employment. Accordingly, this is a day-one right to unpaid leave for new starters, which may limit uptake.
Parental leave permits employees to take up to 18 weeks of unpaid leave before a child reaches 18 years of age. This will become immediately accessible from day one. The unpaid nature of this entitlement limits uptake in practice. However, employers must prepare for potential disruptions, particularly in small teams where arranging cover may be challenging.
The extension of pregnancy-related protections to six months post-return to work creates a significantly longer period of legal risk. Dismissals during this extended protection period will be deemed automatically unfair in all but a select few exceptional circumstances. These circumstances will be defined in forthcoming regulations. The expansion of bereavement leave will also include pregnancy loss before 24 weeks of gestation and other close family bereavements, which will be defined in the regulations.
Employers must update their family leave and bereavement policies to reflect these day-one entitlements and expanded protections. Line managers require training on the extended pregnancy protection period and the heightened risk of automatically unfair dismissal. The combined effect of these changes significantly increases both legal exposure and operational complexity.
Conclusion
These three changes represent only a portion of the Act’s transformative impact. The Act will introduce many additional reforms including zero-hours contract protections, fire-and-rehire restrictions, enhanced statutory sick pay entitlement and strengthened flexible working rights.
The initial April 2026 changes are only a couple of months away. Employers must act now to review policies, implement necessary changes, and ensure compliance before the new obligations take effect. Given the Act’s tight timeline, early preparation is essential to mitigate operational disruption and legal exposure.
If you would like to discuss any of the issues raised in this article or another employment law matter, please don’t hesitate to get in touch with our Employment team.